Posted by: audreybenenati | January 22, 2010

Paterson takes a small puff at collecting tax on Indian tobacco


By Dan Guzewich, staff writer

Gov. David A. Paterson says he’s going after unstamped tobacco products sold by Indian retailers, but he’s not saying how much money might flow to the state’s treasury if he’s successful.

In his budget released today, Paterson said the Department of Taxation and Finance will withdraw its advisory opinion regarding forbearance of sales by agents of unstamped product to Indian retailers. The state claimed entitlement to collect taxes from cigarettes sold to non-Indians on Indian land, but declined to do so.

Now the governor is proposing is for the Tax Department to prepare regulations for public comment, a process that will take six months. This action will permit the state to seek the lifting of the injunction preventing the state’s 2006 statute prohibiting the sales of unstamped cigarettes to Indian retailers from going into effect. The purpose is to stop wholesalers from selling unstamped cigarettes.

Non-Indian retailers pay a state levy of $2.75 for each pack of cigarettes they sell−not to mention sales tax.

Citing sovereignty and treaty rights, Native Americans like the Oneida Indian Nation staunchly resist collecting New York taxes on cigarettes and fuel. Similarly, tribes do not collect state and local sales taxes from non-Indian customers. Paterson is the latest governors to try and tap this revenue stream.

The non-taxation of goods sold by Indian retailers has been both a controversial and unresolved issue that faced the last three governors.

Legislators claim the “lost taxes” amount to millions of dollars each year. For example, the county sales tax on tobacco products sold by the Oneidas at Turning Stone Resort and Casino and other tribal operations in the county could bring in an estimated $3 to $6 million.

No revenue is assumed in Paterson’s financial plan unveiled today because the regulatory process to set up the tax collections related to these products is not yet complete. The governor maintains his commitment to tribal sovereignty and says his administration will work with native American tribes to implement these measures “in a peaceful and efficient manner,” according to the state Budget Division.

“In addition, as I have consistently said, I believe we need to enforce the law to collect sales tax on cigarettes sold by Native American businesses,” said state Sen. David J. Valesky, D-49, Oneida, in a statement commenting on Paterson’s spending plan. In a ceremony in Utica in December 2008, Paterson signed a bill intended to force the collection of state taxes on tobacco products sold to non-Indians. The bill forces wholesalers to sign an oath, under penalty of perjury saying the cigarettes they sell would not be resold untaxed in violation of state law. A state appeals court placed an injunction against a similar law passed in 2006 because the Tax Department had not worked out a coupon system for retailers to claim tax refunds on cigarettes sold to tribal members.


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